Gabe Newell: Valve - The Company

Full podcast here.

  • I think there are these structural changes occurring across many industries. There is a blurring of lines between creators and consumers. Nowadays it is cheaper for a kid in Kansas City to sell his content to users all over the world than it was 10 years ago for the most efficient company in the world to do the same thing. (15:04) 

  • Essentially all the money for every movie, book, game, etc comes from the people who are consuming it. You have these financial intermediaries who are not really contributing much to the eventual outcome. [This will not last. Things will be different in the future.] (22:00) 

  • What do you think big companies have to do to stay relevant? I don’t think they will. I think the rate of change is too fast for most of the companies to adapt.(27:04) 

  • If you look at the design of modern corporations it is derived from poorly tested methods of organizing production and allocating capital. It causes everyone to think they are separate from their customers. Which in this day and age is not helpful. (28:34)

  • The rate of change of technology will more than offset the efficiencies of scale. (30:10)

  • Another problem with old, large companies is they are still trying to say: How does this new thing (the internet) map to the old model? Rather than realizing the old model succeeded in spite of its problems. (34:00)

  • The Valve Company Manual says if you are working overtime you are not managing your time correctly. You have to learn how to avoid burnout. We say to people: No, no, no. You have to do this for the long haul. (45:21) 

  • In a flat company structure (with no hierarchy) who you add to the collective is insanely important. One person can have a huge impact in a flat structure. Both positive and negative. (49:56)

  • You will find more and more that highly structured, non-self-organizing groups can’t deal with the rate of change. Organizations are enemies of what you will do next year. They are a chronicle of what you were successful at previously. (50:16)

  • Example: Microsoft was startled by Google. Google was startled by Facebook. It is like come on guys: Microsoft you were sitting there watching IBM completely fail to adapt quickly enough to the rate of change of the technology industry. You should not be surprised if you do a bunch of things that make you less responsive to customers or technologies or how businesses are evolving… you shouldn't be surprised if you get left further and further behind. (51:25)

  • Corporations are not that old. And a lot of the practices associated with them are not that old. It is not like these things have withstood 1,000 years of history. The internet will do a better job of organizing people’s output and enabling their consumption than corporations. (53:29)

  • The main point I am making is the rate of change is increasing. So the things that have been challenging to existing approaches like corporations —those challenges are not decreasing. (56:18)

  • It will be harder and harder to just copy. Example: Everyone who is trying to copy Apple is getting crushed. They are the most valuable company in the world because they are on the front edge. Every other company that is saying: But we are doing exactly what you did 2 years ago! Yeah. That is why we are not buying your thing. (57:30)

  • No gatekeepers at Valve: Everyone here makes something. No one here says my job is to go to the people who are actually creating and give them permission to do it. Do something that directly helps a customer. This creates value. A sign of a bad company: A large percentage of employees are not involved in anything that the customers directly experience. (1:01:52)

  • We don’t think we are smart enough to make decisions that are too far into the future.  (1:06:27)